Today, the largest milk cooperatives
in the U.S. abuse the power to collectively bargain on behalf
of dairy farmer members in order to obtain just and equitable
milk pricing. In fact, many milk cooperatives and dairy processors
collaborate to keep farm milk prices low, reducing corporate costs
through price manipulation at the Chicago Mercantile Exchange.
The graph below illustrates how closely CME block price and farm
milk gate prices correlate.
However, U.S. dairy farmers cannot access information on how
these large cooperatives trade its raw product in the marketplace.
For example, in the 2nd Circuit U.S. Court of Appeals case Shaw
v. Agri-Mark, Inc., judges ruled that: “persons who are
not stockholders of a corporation have no right under statutory
law to inspect the corporation’s books and records.”
According to the judges, farmers did supply equity capital to
the cooperative stock corporation and did directly elect its directors
but did not acquire the title of “stockholders of record”
needed to inspect the corporation’s books and records.
Because farmers, up until this point, exhausted every effort
to gain access to a supposedly openly-traded marketplace and failed,
the National Family Farm Coalition, in the interest of America’s
dairy farmers and the general public, requests the 108th Congressional
Judiciary Committees to launch a farm-gate milk price mechanism
investigation, beginning with the Chicago Mercantile Exchange.
Prior investigations of similar marketplaces, like the National
Cheese Exchange (NCE, formerly located in Green Bay, Wisc.), required
utmost subpoena power to obtain necessary data for non-bias report
compilation. For example, in 1996, the University of Wisconsin
released a report entitled: “Cheese Pricing: A study of
the National Cheese Exchange.” The University of Wisconsin
repeatedly ended up in lengthy court battles to demonstrate the
manipulation of price on the National Cheese Exchange, particularly
for Working Paper 116: Price and Profit Performance of Leading
Cheese Marketers: Some New Evidence.
Available online: (http://www.aae.wisc.edu/fsrg/publications/Archived/wp-116.pdf).
Instead of fixing the National Cheese Exchange’s flaws,
however, trading moved from the NCE to the Chicago Mercantile
Exchange. There, trading activities still determine farm milk
price—hiding behind the same complicated formulas, corporate
control, and secret deals.
Moreover, as it stands today the U.S. government allows corporations
to work both sides, buying domestic products significantly below
the cost of production while generating additional profits from
low-cost imports also supplemented by taxpayers’ money.
For example, Dairy Farmers of America (DFA) is a dairy cooperative
for U.S. dairy farmers. It controls 29 percent of the nation’s
milk, holds 11 import licenses and maintains multiple partnerships
with foreign and domestic institutes that hold a vested interest
in keeping farm milk prices low.
The record shows that in the first week of May 2003, DFA sold
1,533,019 pounds of cheese to the USDA’s Commodity Credit
Corporation (CCC) surplus program. In the same week, DFA, in a
joint venture with New Zealand giant Fonterra, sent 1,061,748
pounds of powdered milk to the CCC from Portales, New Mexico.
Thus, in one week, DFA and its New Zealand partner garnered $2,583,856.10
from U.S. taxpayers, contributing to the illusion that America’s
dairy farmers produced more than the market demands.
Furthermore, the government does nothing to protect the consumer,
who continues to pay the same or increasing prices at the grocery
store for dairy products while the processors and retailers reap
record profits.
For example, while New England dairy farmers suffer through the
lowest milk prices in 25 years, the region’s predominant
dairy processor, Dean Foods (formerly Suiza) profit from an increasing
wholesale-retail price spread. Currently, America’s farmer
receives only 28 percent of the product’s retail price.
Meanwhile, Dean’s stock rises from just under $30.00 in
September 2001 to $45.75 after profiting from low farm milk prices.
In conclusion, the National Family Farm Coalition will reiterate
the request, in the interest of America’s dairy farmers
and the general public, of the 108th Congressional Judiciary Committees
to launch a farm-gate milk price mechanism investigation, beginning
with the Chicago Mercantile Exchange.
